The Minimum Wage

A couple of weeks ago I wrote about Linda, a single mom struggling with two kids and an income of $18,000 a year, and wondered how much tougher yet it must be for someone at the minimum wage (currently $5.15, or about $10,000 a year). As usual, you had some thoughtful, and thought-provoking, things to say:

“My father-in-law was a union worker as were many of our friends. I’ve seen what often happens when a union goes on strike for wage increases – ‘$X is not enough to live on in dignity. We insist on $Y as a minimum living wage.’ They forget, as you forget, that $4.25 and $5.15 are not the only alternatives. One other alternative is to not have a job, because the wage you demand is higher than an employer is willing to pay for your services. Which is better, to be employed at $4.25 or unemployed at $5.15?” – Ray Van Tassle

A.T.: Clearly, this is the other side of it.

I think there’s a balance here. There will be instances where a business closes or shrinks if the janitor or burger-flippers – or bookstore clerks – have to be paid $5.15 instead of $4.25. But the recent increase in the minimum wage doesn’t seem to have killed the economy or sent unemployment spiking. Most of those jobs need doing and can’t easily be lost to low-wage countries (how is a 20-cent-an-hour child laborer in Bangladesh going to sweep the floor or flip the burger in New Jersey?) nor automated (I’m still waiting for a machine to make my bed). It’s just that many of those workers have very little power to negotiate. The floor needs to be swept, but some desperate person, competing with other desperate people, might be found to sweep it for $3 an hour. The minimum wage sets a floor (just as a state’s usury law sets a ceiling).

“My problem with the minimum wage is that it is not well targeted. Although I am not as bad off as Linda, my wife and I have to work hard to support our family. When the minimum wage is raised it doesn’t help me but appears to help the teenagers of middle class families have more disposable income to spend on CDs and clothes.” – John Waggenspack

A.T.: John has a good point, though it leads one to wonder: Should a kid get less than another kid for the same hour of work – $4 versus $6, say – because his parents have some dough? I also wonder whether in the long run it may not help the rest of us when the minimum wage is raised. It gives those workers a little more money to spend, which helps the economy; and a little less call on taxpayer-assisted programs.

On top of that, I think it may simply be more fair. You might be able to find a maid willing to work for $3 an hour – but is that all you’d pay to avoid having to do it yourself? No, you’d probably be more generous. Well, how about $3 an hour to work at McDonald’s making you lunch? Even though it might lower the cost of lunch by a dime, my guess is that most customers would want to give the poor working stiff a break. And yet competitive pressure for market share and profit give store managers an incentive to pay as little as possible. The minimum wage is a crude but useful way to try to put some protection in place to keep that competition from getting too cruel.

“While totally sympathetic to the problem of low-income workers, I can’t afford $5.15 an hour. There are people who would and could work at my bookstore for less, but I would break the law by offering them what we both want. Also, $5.15 becomes much more after FICA and the rest are added in. How can you believe in free markets and demand that government over-regulate them, at the same time?” – Paul

A.T.: Well, I wouldn’t want over-regulation.

“P.S.,” Paul continues, “I have several of your titles in stock. I can keep the price down if I am not forced to pay an employee a mandated wage.”

A.T.: Don’t keep the price down on my account. But, yes, what with the chains offering discounts, and now the online booksellers, running an independent bookstore has got to be a tough, tough business. Some haven’t made it and others will close as well. (Just as online banking will close many a bank branch and ATMs have cut the jobs of many a teller.) Yet I’m not sure that lowering or eliminating the minimum wage would be the best solution.

“Here in St. Paul, Minnesota, I personally don’t know anyone – including teens working at fast food restaurants – who settles for the minimum wage. A booming economy and not enough ‘good’ workers (unfortunately, that means just about anyone who shows up for work at the assigned time) has raised many entry level and minimum wage jobs, in some cases, significantly higher than the so-called minimum wage. That is not to say, however, that a family (or even a single person) can live well on these higher-than-minimum wages.

“At the same time, we have here in Minnesota a serious shortage of semi-experienced, skilled and computer-literate entry level employees to fill jobs that pay at the next higher levels of wages. You seem to cast aspersions at the Republicans, but what of the ‘Democratized’ educational system that has so miserably failed society at preparing lower income people for better jobs through rudimentary educational tools, and what blame do we put on the ‘victims’ of these minimum wage jobs (which are supposed to be entry level anyway) who do not have the self-discipline and responsibility to climb above this level?

“I’ve enjoyed reading you over the past years or so, and I intend to keep doing so, but I think you’re getting a little too partisan, and thus unfair, in some of your thinking. Hard questions aren’t so easily answered as you hint at, and one party is not exclusively guilty of hurting people, as you suggest. That’s maybe why we Minnesotans recently selected a rather unorthodox choice for governor. Because he doesn’t want to play the partisan blame game and finds the extreme solutions of both ends itself hurtful.” – Bob Wicker

A.T.: I agree that the Democratic Party has been too beholden to the teachers’ unions (which are not wrong about everything, but are not right about everything either). I admit that I generally find the views of “new Democrats” (i.e., those like President Clinton and Governor Romer and Senator Lieberman), who favor free trade and many of the same sensible economic policies as moderate Republicans, far preferable to those of “Trent Lott Republicans.” In that sense, I am partisan. But I totally agree that “hard questions aren’t easily answered” – and, like you, I cringe at the partisan blame game and all the oversimplification and demagoguery. (Though of course, being a Democrat, I think you guys started it.*)